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    Published on: March 7, 2022

    Michael Sansolo joins KC today after spending time in a Wegmans located in the suburbs north of New York City,  a visit that prompted a discussion of Wegmans' evolution, a coming competitive battle it will face in Connecticut, and two distinct visions of what tomorrow's supermarkets may look like.

    Published on: March 7, 2022

    The Philadelphia Inquirer has a piece in which it quotes analysts as saying that Albertsons, which last week said that it would engage in a "strategic review" as a way of maximizing shareholder value - a move broadly seen as a way for Cerberus Capital Management to sell off its one-third stake in the company - may in fact "be looking to unload some of its nearly two dozen grocery chains."

    The story notes that "Albertsons, the second-largest grocer in the U.S. behind Kroger, put out feelers to possible suitors in its Feb. 28 announcement. The company said the review, aided by Goldman Sachs and Credit Suisse, would include mulling 'potential strategic or financial transactions' and entertaining 'inquiries,' typically outside offers of possible mergers or acquisitions."

    Some context from the Inquirer piece:

    "Though the review caught some industry observers by surprise, analysts from Morgan Stanley to Guggenheim speculated that parent company Albertsons could be worth more in pieces, providing a hefty payout for its larger investors. Albertsons operates about 2,300 supermarkets, 1,700 stand-alone pharmacies, 400 gas stations, and dozens of warehouses and food processing plants, spread among 34 states. Besides Acme, Albertsons’ major brands include Safeway, Jewel Osco, and Vons.

    "Albertsons and other grocers have felt increasing pressure, not just from Walmart, whose in-store markets rank it with the largest supermarket operators, but also Amazon, whose same-day deliveries and purchase of Whole Foods have positioned it to sell more groceries. Grocery consultants say even the largest chains will have to spend more on marketing, inventory, automation and delivery services to protect market share."

    KC's View:

    First of all, let's stipulate that anything could happen here.

    When I first heard the news, I wondered if it could lead to a breakup of a company that has taken a long time to assemble, which in many ways would be a shame because I think that Albertsons has the kind of leadership - like CEO Vivek Sankaran and Chris Rupp, the EVP/ Chief Customer and Digital Officer - that would allow it to make real strides going forward.

    There may be some divisions more likely than others to be sold.  Dr. John Stanton, professor of food marketing at St. Joseph’s University in Philadelphia, suggests to the Inquirer that Acme - which has about 161 stores in Connecticut, Delaware, Maryland, New Jersey, New York, and Pennsylvania - could be sold “as real estate."  Let's keep in mind that Kroger, which does not have stores in the northeast, has said that it plans to enter the region with a pure-play e-grocery model;  the availability of these stores could change the calculation.

    It also seems likely that the Shaw's/Star Market division in New England could be vulnerable.  (I know folks there who have suggested to me that their division is an unwanted stepchild anyway, and they might welcome being divested.)

    Whatever happens, the one thing that is critical is for any of these stores/divisions to be appropriately resourced so that they can continue to compete.  If the play here is to just make a financial killing on the sale of a division or divisions, and those businesses are going to be in a position where they are trying to survive with diminished budgets and less ambition, then in the end, it won't be good for the stores, the employees, or the communities they serve.

    Like it or not, grocery retailing has become a higher-stakes game than ever, driven in that direction by disruptive approaches taken by the likes of Amazon, Walmart and Kroger.  Albertsons has been moving in that direction as well, but "strategic reviews" designed to "maximize shareholder value" always worry me a bit.

    Published on: March 7, 2022

    Axios reports on a new study from the Organic Trade Association (OTA) suggesting that "the price gap between organic and conventional foods is shrinking."

    The study found  that "private-label organic items were 14.7% more expensive than regular food in January, down from 22.7% in April … The shrinking price gap is particularly noticeable in produce.  Organic apples cost 33 cents more per pound in January, down from 43 cents a year earlier. And organic tomatoes cost 10 cents more, down from 23 cents more."

    Some context from the piece:

    "Organic food has historically been harder to afford than regular items, putting it largely out of reach of many lower-income shoppers.  But big-box grocers like Walmart and Kroger are making organic options more accessible with private-label goods … Organic food is no longer exclusive to the shelves of stores like Whole Foods and Trader Joe's - and that means it’s no longer commanding the same price premium as it once did."

    However, Axios writes, "The prices of some organic products have jumped in recent months. The price gap between brand-name organic items and regular food increased month-over-month in December and January, according to DataWeave."

    And, Axios concludes, "Although debate continues about the value of organic items, the Mayo Clinic reports that there's 'a growing body of evidence that shows some potential health benefits of organic foods when compared with conventionally grown foods,' including more nutrients and less exposure to pesticides."

    Published on: March 7, 2022

    CNN reports that Best Buy, having survived and even thrived despite tough competition from the likes of Amazon, now wants to "expand its footprint into health, fitness, personal electric transportation, outdoor products and other potentially big ticket areas outside of its core consumer electronics business.

    "It's adding merchandise to stores in dedicated sections, such as Hydrow and NordicTrack home gym equipment, Super 73 and Segway e-bikes and scooters and Weber outdoor grills."

    "We're expanding our addressable market by entering new categories in areas like health and electric bikes that are being disrupted by technology," said CEO Corie Barry. "Forty percent of Americans use digital technology or the internet in new or different ways compared with before the pandemic."

    Best Buy has about 1,000 stores, but plans to close almost 10 percent of them - as many as 30 a year over the next three years - as it "addresses the shift by its customers to shop more online."

    KC's View:

    Retail analyst Neil Saunders said last week that Best Buy "is a solid, well-run business with a clear vision. However, there is no denying that it is now in a more challenging place."

    No kidding.

    I have an idea, though.  Best Buy could buy Peloton, and merge the latter's workout instructors with its Geek Squad.  I think that there are some enormous opportunities here … just imagine what it would look like if you cross-linked the DNA from these two images (from the Best Buy and Peloton websites)…

    Published on: March 7, 2022

    Excellent piece in Fast Company, which suggests that "it is rather staggering that nearly 69 million people quit their jobs in America last year—and the common assumption is that everyone who resigned found a new employer willing to give them a meaningful bump in pay.

    "Aligned to this thinking, of course, companies could effectively end the Great Resignation, and stop the hemorrhaging, by beefing up their employee compensation and benefit plans. But if this really were the cure-all, shouldn’t we have seen a significant decline in turnover in recent months, rather than a record number of people packing up their boxes and heading elsewhere?"

    There is no question that "Pay and benefits clearly matter: 64% of job seekers say the desire to earn more money is an important driver of the job search."

    But there's something else going on here, according to Gallup’s chief research scientist, Jim Harter:

    "Gallup’s research shows that 42% of the reasons people are quitting are tied to how they feel about their bosses and organizational cultures. And low engagement is specifically experienced when workers conclude they aren’t growing, appreciated, or treated with care and respect. Another 21% boils down to well-being, employees’ feelings about their work-life balance, work schedules, and their ability to work remotely some of the time."

    You can read the piece here.

    KC's View:

    I'm not a chief research scientist - I'm not a scientist, I know very little about research, and it is hard to be a "chief" anything in what is largely a one-man band - but this doesn't surprise me … I've been writing here forever about how important it is for workers to feel like an investment, not a cost.  That feeling hasn't been fueled by research, but rather by experience working for people with radically different values and view of value than mine.

    There continues to be a myth out there that people are quitting their jobs because they're surviving on inflated government assistance, but I don't think that's the case anymore.  That may have been true in the early days of the pandemic, but now I think it is more a convenient excuse that allows some folks to avoid dealing with the reality that employees are looking for something more from their work lives than they've been getting.

    Deal with it.  Or not.  But I think the companies that embrace this as an opportunity to be better and do better will be the ones with the best and most engaged employees.

    Published on: March 7, 2022

    From USA Today this morning:

    "Stoli rebrands vodka and will no longer use Stolichnaya name amid Russia invading Ukraine

    "Just call it Stoli vodka.

    "The Stoli Group announced last week that it was doing a 'major rebrand' and ending 'the use of the Stolichnaya name' because of Russia's invasion of Ukraine.

    "The brand's founder, Yuri Shefler, said the factors behind the decision include his 'vehement position' on the regime of Russian President Vladimir Putin and 'the desire to accurately represent Stoli's roots in Latvia.'

    "'While I have been exiled from Russia since 2000 due to my opposition to Putin, I have remained proud of the Stolichnaya brand,' Shefler said in a statement, adding the name no longer represents the organization. 'More than anything, I wish for 'Stoli' to represent peace in Europe and solidarity with Ukraine'."

    According to the story, "Only 1.2% of U.S. vodka imports come from Russia … Stoli Vodka's production facilities have been located in Latvia since Shefler was exiled, the company said. After Russia's invasion of Ukraine, Stoli said it would engage exclusively with 'Slovakian sources to further ensure 100% non-Russian alpha grade spirit'."

    KC's View:

    So many companies are doing whatever they can to distance themselves from Russia - doing business there has become ethically untenable, and the state of our technology means that if you are not responsive to the moment, everybody is going to know about it.

    I'm old enough to remember the war in Vietnam, which always has been referred to as the first war that played out on television, which is part of what fueled domestic outrage and resistance to what was going on there.  But this may be the first war that is playing out on social media - everybody there has a camera, everybody there is able to upload scenes of horrible destruction to the internet so the whole world can see it.  War crimes play out on our phones and laptops, and the denials sound hollow, while the people making those statements sound sociopathic and cut off from reality.

    There's clearly a business lesson here, but for the moment, I do not want to dwell on it.  Too soon.

    Published on: March 7, 2022

    Random and illustrative stories about the global pandemic and how businesses and various business sectors are trying to recover from it, with brief, occasional, italicized and sometimes gratuitous commentary…

    •  In the United States, there now have been a total of 80,917,522 Covid-19 coronavirus cases, with 54,753,181 reported recoveries and 984,020 deaths - that's approximately 3,000 deaths since Friday, almost all of which could have been avoided.

    Globally, there have been 446,988,237 total cases, with 380,271,192 reported recoveries and 6,022,392 fatalities.   (Source.)

    •  The Centers for Disease Control and Prevention (CDC) says that 76.5 percent of the total US population has received at least one dose of vaccine … 65.1 percent are fully vaccinated … and 44 percent has received a vaccine booster dose.

    Published on: March 7, 2022

    •  From the Financial Times:

    "Twenty four institutional investors in Amazon are putting pressure on the ecommerce group to increase transparency on where and how much it pays in tax around the world.

    The investors — who include asset managers Nordea, Royal London and several large European and US pension funds — are trying to get a shareholder resolution brought at the group’s annual meeting this year, which if passed would significantly overhaul the company’s tax public disclosures.

    "The resolution demanding Amazon adopt a new reporting standard on tax practices was originally brought by a Catholic investment fund and UK public retirement scheme in December."

    Published on: March 7, 2022

    •  From the Associated Press:

    "While there have not yet been global disruptions to wheat supplies, prices have surged 55% since a week before the invasion amid concerns about what could happen next. If the war is prolonged, countries that rely on affordable wheat exports from Ukraine could face shortages starting in July, International Grains Council director Petit Arnold told the Associated Press.

    That could create food insecurity and throw more people into poverty in places like Egypt and Lebanon, where diets are dominated by government-subsidized bread. In Europe, officials are preparing for potential shortages of products from Ukraine and increased prices for livestock feed that could mean more expensive meat and dairy if farmers are forced to pass along costs to customers.

    "Russia and Ukraine combine for nearly a third of the world's wheat and barley exports. Ukraine also is a major supplier of corn and the global leader in sunflower oil, used in food processing. The war could reduce food supplies just when prices are at their highest levels since 2011."

    •  BJ's Wholesale Club announced last week that it plans to open four new clubs, which it described as "the first phase of its 2022 development plans."

    According to the company, the "newest clubs will be located in Warwick, R.I., Lady Lake, Fla., Canton, Mich., and Greenburgh, N.Y. … The new clubs in Florida, Michigan and New York will feature an extensive selection of fresh foods, a full-service deli and household essentials like paper products, cleaning products, diapers, pet supplies and more. Plus, the clubs will offer an exciting assortment of fashion for the family, seasonal items, toys, hot tech and a selection of local products.

    "The Warwick, R.I. club will serve as an innovation lab for the brand. Named BJ’s Market, the club will allow for testing out new assortments, displays, product demonstrations and convenience initiatives."

    •  From the Wall Street Journal this morning:

    "Shake Shack Inc. is offering the cryptocurrency bitcoin as a reward for purchases made at the burger chain using Cash App, a digital wallet offered by Block Inc.

    "Customers will receive 15% of their purchase back in the form of bitcoin on any Shake Shack purchase made with Cash Card, a debit card available to Cash App users, and by buying items via Cash Boost, a rewards program available to Cash Card members.

    Users can search for the promotion in Cash App, under the Cash Boost program and Cash Card tab, through mid-March.

    "Shake Shack is testing whether it can reach younger consumers on Cash App and if customers are interested in more cryptocurrency options, executives at the burger chain said … Shake Shack hasn’t seen demand from its customers to pay with cryptocurrencies, so this experiment will be helpful in determining if the company should begin accepting them as a form of payment or extending the rewards program at some point, said Jay Livingston, chief marketing officer of the burger chain."

    •  From the Financial Times:

    "Unilever is to publish nutrition scores for its food portfolio, which includes Ben & Jerry’s and Magnum ice-cream, Hellmann’s mayonnaise and Knorr stock cubes, against external health metrics and set new targets following pressure from investors over obesity.

    "The pledge to assess performance against six measures, including the UK’s 'high in fat, sugar and salt' definition and Europe’s Nutri-Score, comes after institutional investors including €150bn asset manager Candriam tabled a shareholder resolution on the issue.

    "Unilever, which is the world’s largest ice-cream maker, will set out fresh targets by October, and said it would be the first global food group to publish nutritional performance in this way. It will assess performance globally and for 16 key markets by product volume and revenues."

    Published on: March 7, 2022

    On Friday, MNB reported that Kroger plans to bring its hub-and-spoke approach to an pure-play e-grocery model to three new markets - Austin and San Antonio, Texas, and Birmingham, Alabama.

    I commented, in part:

    It seems to me that what we are watching here is the creation of a new competitive reality that will affect every retailer, and give some enormous advantages - the battle will be played out not just in stores and on websites, but, increasingly, also in the various permutations of distribution centers that are positioned to provide differential advantages in terms of speed and efficiency.

    It is much cheaper for Kroger to serve these markets with a pure-play e-grocery model than it would be to build stores;  it has a highly recognizable brand name, and its longtime investment in data-centric technology developed (and more important, effectively implemented) by dunnhumby and its successor US company, 84.51°, that allows it to effectively target and serve customers.

    The enormous investment in this infrastructure cannot help but ramp up the pressure on Kroger's competitors, big and small, to respond.  And it certainly has the potential for raising the bar on consumer expectations.

    Let's be clear.  Having infrastructure is not the same thing as delivering service.  Kroger is establishing an expanded value proposition and is making brand promises that it needs to keep.

    But this is a 21st century competitive map with tons of potential and, almost certainly, more than a few potholes around which Kroger will have to navigate.

    One MNB reader wrote:

    I have lived in Kroger Markets (Columbus and So. Cal), and I have lived in non-Kroger markets (MN, RI, NJ, PA).

    Not once when living in a non-Kroger market have I wished for something I could only get from Kroger.  Not once.  Kroger must think they can be cheaper – because they certainly are not different.  Walmart will burn the furniture to stay cheapest.  Kroger management is a hell of a lot smarter than me – but I do not see the winning play here.

    Which is why I wrote:

    Having infrastructure is not the same thing as delivering service.

    To expand on that … I also commented on Friday that:

    Competition does not know geography, nor borders, nor inherent limitations.  Market share and trade-area-analyses may take on very different meanings going forward.

    Just having stores, or just having an e-presence, is not enough.  You have to have a compelling and differentiated offering.  Those are the pieces of the puzzle that Kroger has to put in places, especially if your observations are common and consistent among other shoppers.

    MNB reader Andy Casey wrote:

    Kroger has tried on more than one occasion to enter the Florida market with stores, retreating each time as Publix roared back. This time is clearly different.

    I don’t have any specific knowledge of the economics involved but if you consider the effective trade area of a single store in a suburban area filled with supermarket options (like Tampa) is maybe 8-10 miles while that of an automated warehouse has to be closer to 80-100 miles (the one serving Tampa is in Groveland which is closer to Orlando) it is pretty clear this investment makes sense. I gave them a try out of curiosity (and a free delivery intro) but have been using them regularly since late summer, diverting some dollars previously spent at Publix and others. I’m still shopping elsewhere but definitely admit the appeal of having someone bring your groceries to the front door is seductive. 

    And from another reader:

    I think these are brilliant moves by Kroger. I've lived in Kroger markets for the last 40 years, so as a shopper I am used to their selection and programs, and I'm loyal to several of their private label products. If I moved to a market without a Kroger store, I'd love to have the option of continuing to shop them as an eCom pure-play. I have to believe there are a lot of consumers out there who feel the same way, which creates instant market share for Kroger in these new cities.

    I used to think Kroger would offer to buy Raleys or SaveMart to get into Northern California (and similarly, other regional operators to enter other markets.) Now it's clear that Kroger doesn't have to have stores in a market in order to claim revenue and market share there. Faster, and less expensive, than buying or building stores. Brilliant.

    We had a story on Friday about Dollar Tree/Family Dollar growth plans, and I couldn't help myself - I went back to the reports about thousands of dead rodents in one of its distribution facilities.

    I commented that it seems likely that management was not …

    prioritizing basic sanitation and food safety.  That's what happens when the bottom line is measured in dollars, and not in more important concerns that matter to shoppers and customers.  Makes me wonder how they define "stakeholders."

    I know they're facing regulatory examination and lawsuits over this, but I don't how management at this company - "leadership" would be the wrong word to use here - are keeping their jobs.

    MNB reader Andy Szabo responded:

    Been in the meat business almost all of my life and visited hundreds of processing plants across the US.

    If you think this is an isolated incident, you are totally naïve!!!!

    I witness paint chips falling from the ceilings in Ohio Plants into bologna and hot dog mixing tubs.

    I couldn’t eat a hot dog for a year.

    Also google the 2019 CNN report.” Bugs, rodent hair and poop: How much is legally allowed in the food you eat every day? “

    But do NOT read Before Breakfast ! ha ha

    Not making me feel better, I must admit.